Auto-parts maker Lear Corp. files for Chapter 11

NEW YORK (AP) — Automotive-parts supplier Lear Corp., which has a plant in Lordstown, filed for bankruptcy protection Tuesday after receiving support from lenders and bondholders to reorganize its struggling business.

The move had been expected from the maker of vehicle seats and electronics, which missed an interest payment on its bond debt last week and revealed its intention to seek Chapter 11 bankruptcy protection from its creditors. The Southfield, Mich.-based company made the filing in the U.S. Bankruptcy Court for the Southern District of New York.

It listed $1.27 billion in assets and $4.54 billion in liabilities. Subsidiaries outside the U.S. and Canada are not part of the filings, the company said.

“We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt-restructuring plan,” CEO Bob Rossiter said in a statement.

Lear’s local plant produces headliners for the Chevrolet Cobalt that is produced at General Motors’ Lordstown complex.

The auto supplier’s first court appearance was scheduled for Tuesday before U.S. Judge Allan Gropper in New York. Attorneys for Lear were slated to ask the judge for approval of typical “first day motions” including permission to pay pre-bankruptcy wages, taxes and certain obligations to its customers.

Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets.

Lear is the first major automotive-parts maker to seek court protection since Visteon Corp., the former parts arm of Ford Motor Co., filed in May. Auto-parts suppliers have been hammered by the economic downturn as consumers continue to avoid buying cars and trucks and automakers slash production.

The Chapter 11 filings by General Motors Corp. and Chrysler Group LLC and the idling of most of their factories has dealt a particularly hard blow to the auto-supply base.

Lear has been particularly hard hit by the slump. It is heavily dependent on the struggling North American and European auto markets, with 36 percent of its sales coming from North America and 49 percent coming from Europe.

Lear, which posted $13.6 billion in sales for 2008, is a key supplier for both GM and Ford. The pair represent the company’s two largest customers and account for a combined 40 percent of its sales.

On Tuesday, Lear said it is hoping for an “expedited” bankruptcy process. The parts maker said it has support from more than 50 percent of its bondholders and about 69 percent of its secured lenders for its reorganization plan, which it plans to submit to the bankruptcy court within 60 days.

In its bankruptcy filing, it listed its top 50 creditors, with many of the largest including its bondholders and suppliers. Its biggest creditor is the Bank of New York Mellon, which has nearly $1.3 billion in bond debt. Among its parts suppliers, Milwaukee-based Johnson Controls Inc. was the largest, with about $5 million owed.

Shares of Lear, which trade on over-the-counter markets since the New York Stock Exchange de- listed the stock, have plunged over the last year after the automobile market began slumping and the company began racking up quarterly losses. Shares closed Monday at 29 cents and fell 2 percent to 28 cents Tuesday. During a bankruptcy proceeding, common shareholders are typically wiped out.